Long Speculator Exodus Sinks Crude Oil
US .. West Texas Intermediate crude futures are inching higher on Friday, but a steep sale of earlier this week has solidified a weekly lower close.
If you haven't noticed, there was a dramatic shift in emotions in the market this week. This was caused by the departure of a couple of events that had supported the market in the short term as the hurricane in the Gulf of Mexico, which knocked down production last week and the elevated tensions in the Middle East that had been the basis of several weeks of prices.
Buyers premiumed for Hurricane Barry, but apart from stopping production for a few days, the storm did little to disrupt the offer. The buyers also drove the prices higher after an Iranian naval vessel had played a British tanker. Again, since there were no supply disruptions, speculative buyers were forced to liquidate.
The bearish surprise for bullish investors earlier this week was the announcement that Iran was willing to talk to the United States about its nuclear power program. The second surprise to the bulls was jumped in the crude oil inventory on Wednesday, according to a government report. Sellers were also controlled by reports of increased US shale production.
At the end of the week, all we can decide is that prices are maintained by OPEC-led supply cuts. And if you believe in the demand figures from OPEC and the International Energy Agency, these cuts are likely to be offset by rising US production, unless OPEC and its allies cut further.
US Stocks of Pressure Prices
US. The commodity inventory fell 3.1[ads1] million barrels, the weekly MER report showed, but this was in line with expectations with some analysts predicting a 2.7 million barrel reduction, and others predicting a 3.6 million barrel draw.
However, petrol stocks rose 3.6 million barrels, compared to analysts' expectations of a 925,000 barrel drop. The distillate stocks grew by 5.7 million barrels, much more than the expectations of a 613,000 barrel increase, EIA data showed.
Late Week Bid, but Still Bearish
Prices were backed a little Friday in the midst of renewed tension between the United States and Iran, but all this means so far are speculative buyers trying to take back some of the previous losses. It also indicates that we will not likely see a longer rally without military action stopping the oil flows from the region.
The United States said Thursday that a US Navy ship had "destroyed" an Iranian drone in the strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.
In other potentially bearish developments, the International Energy Administration (IEA) 2019 revises oil demand growth forecast to 1.1 million barrels a day (bpd) and can cut it again if global economy and especially China show further weakness, director Fatih Birol, EIA, said. This year, the IEA predicted that oil demand in 2019 would grow by 1.5 million bpd, but had already cut its growth forecast to 1.2 million bpd in June this year.
Technical Analysis
Weekly September West Texas Intermediate Crude Oil Technical Analysis
The main trend is down according to the weekly swing chart. A trade through $ 64.02 will change the main trend up. This is followed by another $ 64.92 mission. A $ 50.91 move will signal a resumption of downtrend. This can lead to a possible test of the next main floor at $ 44.66.
The smaller trend is also down. It was denied when $ 56.13 failed as support. The new smaller top is $ 61.02. The weak price action also means that the momentum has fallen to the disadvantage after strengthening since the end of the week on 7 June.
The main area is $ 74.44 to $ 44.66. Its retracement of $ 59.55 to $ 63.06 is resistance. This zone stopped the rally in the week end July 12 at $ 61.02.
The smaller selection is $ 44.66 to $ 65.92. Sets retracement zone of $ 55.29 to $ 52.78 is the next downside goal. The upper or 50% level in this $ 55.29 range is currently being tested.
Weekly forecast
After this week's long liquidation, traders look for a balance area. OPEC cuts are still supportive, and the situation in the Middle East remains warm. Although the United States and Iran are planning talks, the two sides are likely to be wide apart so that nothing can be achieved during this first round of discussions.
Wildcard is trade relations between the United States and China. Reports say that the two sides do not make any progress and can be hung over the US processing of Chinese communications Huawei. If the calls turn off, tensions over lower demand will rise again, and we'll probably see another round of sales pressure on global economic growth issues.
Technically, based on this week's price measures, the direction of the September WTI commodity is the oil market next week is likely to be determined by the trader's response of 50% to $ 55.29.
Bearish Scenario
A sustained move below $ 55.29 will indicate the presence of sellers. If this move creates enough drawbacks, look for the market to possibly accelerate to the Fibonacci level of $ 52.78. We could see a technical bounce on the first test at this level, but if it fails, the prices can jump further into the bottom of $ 50.91.
Bullish Scenario
A sustained transition of over $ 55.29 will signal the return of buyers. This can trigger some light short circuit, unless the move is event driven. If it's bullish news, then we can see a rally back to $ 59.55.
